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Romney aide on more taxes

McCarthy: Dems differ on fiscal cliff

“Eliminating loopholes” sounds a lot better than “raising rates”: The tax rate is what I pay, and a loophole is what the other guy gets.

But the biggest loopholes in the U.S. Tax Code — generally referred to as tax expenditures — aren’t just the tricks of the trade for millionaires with offshore bank accounts. For the vast majority of Americans, they’re just how things work: You don’t pay taxes on your health insurance or Medicare benefits; you contribute tax-free to your 401(k); and your mortgage interest pushes down your tax bill each year.

And even if you dump the biggest of the set, these tax perks don’t even come close to closing the deficit. At best, the top 10 would pull in an extra $834 billion a year, according to Joint Committee on Taxation figures. Considering the hole lawmakers are trying to fill is several trillion dollars large, it’s clear they wouldn’t even come close.

Here are the 10 biggest tax loopholes — and the reasons why most of them will survive the fiscal cliff.

Exclusion of employer-sponsored health insurance — $164.2 billion

A vestige of the World War II era, the health insurance tax exclusion is the big kahuna of expenditures.

More than 60 percent of Americans get their insurance through their jobs, making this “loophole” part of the fabric of the workplace. The exclusion is popular generally — and very important to lower- to middle-class workers who might otherwise be shut out of the expensive insurance market.

It’s also a boon to health insurers because it expands their client base.

For nearly 40 years, workers have taken for granted that contributions to, and earnings from, long-term savings plans like 401(k)’s and individual retirement accounts are not taxed upfront.

The exclusion is designed to encourage Americans to save more for retirement even though it has an outsize benefit for higher-income workers, who contribute more and pay higher marginal rates. The Brookings Institution’s William Gale has proposed replacing it with a nonrefundable tax credit.

But critics say getting rid of the tax break would also make folks at the lower end of the pay scale less likely to put money away for retirement.

Mortgage interest deduction — $99.8 billion

It’s always the first tax break mentioned when talk of tax reform heats up. And it’s always the first one to be taken off the table.

See, this is why Republican's are for closing loopholes rather than raising rates. Of the 814 billion saved from these 10, only 3 of them actually hit the top 2%, their rich overlords. Lower capital gains rates — $71.4 billion Exclusion of gains at death and the gift carryover exclusion — $51.9 billion Deduction of charitable contributions — $51.6 billion

The rest smack right into the middle class, whom they pretend to be supporting. Neither Romney nor Boehner would ever give details on which ones they wanted to close, but its pretty clear that all 10 were on the table, to even approach a meaningful amount of revenue. As usual, they want the peasants to fix this issue that wall street created, and we're sick of it.

Even conservatives out there must at least secretly admit that this would be *devistating* to the middle class, and not a valid solution.

Sosha Liz Um #3. Politico: " At best, the top 10 would pull in an extra $834 billion a year, according to Joint Committee on Taxation figures."

How much does taxing the rich pull in each year?

That was pretty much exactly what I thought when I read that. How could this article just blithly dismiss 834 billion? Taxing the top 2 percent by letting their Bush Tax Cuts expire would bring in something like 80 billion a year. Closing loop holes could bring in 10 times that amount.

So then do them both? Part of this is an equality question. If the middle class is expected to carry a burden, so should they.

Next years grand bargain needs to be sweeping, and alot will be on the table. I for one will feel ok contributing to digging us out of this mess, but not if its business as usual, i.e. the rich get richer.

Most of the top ten won't be touched and that's all right. Some should be reformed and all should target the mooching rich.

For example, they should keep the popular and widely helpful mortgage interest deduction but on first homes only. (If you're rich enough to buy a second home, you're rich enough to pay fo it without government help.) Call it closing the Romney loophole.

Capital gains rates should go up, as the lower rates help mainly the overly wealthy, who need no help. The Buffet Rule applies here or call it the Romney tax hike.

Estate taxes should go up -- way up! Income inequality, no more recognized by the Republican Party than global warming, is a major threat to a truly united United States. Letting individuals accumulate mountains of money breeds hardhearted callousness to the needy and human suffering. It serves no country well to have individuals as rich as certain countries are. It builds a false plutocratic aristocracy and undermines the family, as in the American family. The privileged feel they deserve things free. Listen to the rich CEOs on Capitol Hill demand their billion-dollar government welfare checks. The hubris! One even called it "unpatriotic" to oppose corporate welfare! All corporate loopholes (except for renewable energy research and development) should be closed. Lower the corporate rate to 25% or so, but make them all pay -- Wells Fargo and IBM too, not merely small corporations that don't qualify for the big government giveaways.

Also the payroll tax cap should be eliminated. Let the wealthy pay Social Security taxes on all their income. Further, means test Social Security benefits, which means take Social Security and Medicare away from the rich. Let them pay out of pocket until their sinking wealth reaches a certain needy threshold. President Obama and the Democrats should go after the wealthy with no apologies. It's simple logic: they don't need the extra help and their country needs the money. Our current deficit is in large part due to paying for unaffordable tax cuts for the wealthiest; let them pay down that deficit their government "gifts" created. Republicans want the fifties back? Well, let's give then the economic boom of the fifties, when tax rates for millionaires was 91% and the stock market doubled, no great alienating income inequality widely existed, corporate tax rates were twice what Obama proposes and the middle class was growing by leaps and bounds.

Capital gains rates should go up, as the lower rates help mainly the overly wealthy, who need no help

I agree Roameo, and this one especially. I love the idea someone put forward of a progressive tax on capitail gains, i.e. 0% tax on the first $200,000, 15% on the next chunk, and 25% on it after $400k. (or whatever numbers they come up with)

That way you stil get a strong incentive for small business entrepreneurs, but theres no need to coddle the uber rich.

First and foremost, the idiots in DC need to redefine what the definition of "rich" really is. A family with an income of $250K is not rich in my book - well off, yes - but not rich. One does not fit all and if they want to use this number, then it should not be used universally across the country - cost of living needs to be considered. As an example - compare rent in San Diego, CA vs Atlanta, GA. Rent prices are 32% lower in Atlanta than San Diego - that is a HUGE difference.

Second, rather than increase tax rates - means test certain deductions and credits. If your income is over a certain amount certain deductions, etc. should either be eliminated or partially eliminated. (I think that this should also be the case for SS and Medicare).

Third, leave Capital Gains alone. This is not something that only affects the so-called rich. Also, the money used as the initial investment has already been taxed - at some point some might think it better to just put that money in a safety deposit box rather than invest since the government wants to tax you for the RISK you are taking in investing in the first place.

First and foremost, the idiots in DC need to redefine what the definition of "rich" really is. A family with an income of $250K is not rich in my book - well off, yes - but not rich. One does not fit all and if they want to use this number, then it should not be used universally across the country - cost of living needs to be considered. As an example - compare rent in San Diego, CA vs Atlanta, GA. Rent prices are 32% lower in Atlanta than San Diego - that is a HUGE difference.

Second, rather than increase tax rates - means test certain deductions and credits. If your income is over a certain amount certain deductions, etc. should either be eliminated or partially eliminated. (I think that this should also be the case for SS and Medicare).

Third, leave Capital Gains alone. This is not something that only affects the so-called rich. Also, the money used as the initial investment has already been taxed - at some point some might think it better to just put that money in a safety deposit box rather than invest since the government wants to tax you for the RISK you are taking in investing in the first place.

As I recall, the last time a major set of changes to the tax code occured was in Reagan's second term? As I recall, that took a year and a half to complete.

I don't see how anyone could expect to even get a start on deliberating each of the ten "loopholes" mentioned above before the supposed "doomsday" tax increase deadline, much less any other deductions in the tax code which may deserve scrutiny.

As we speak, armies of lobbyists are descending on DC to defend those deductions and loopholes which benefit their clients.

With roughly 40 days to go before the deadline and with two intervening major holidays, we shall now see who in DC is willing to sacrifice and to work hard at what will turn out to be some very difficult deliberations.

The gap that lawmakers are trying to make up is trillions of dollars, but over ten years. That is how deficit reduction plans are assessed -- their ten-year impact. Eliminating all loopholes, using the $834 billion figure, would reduce the deficit by roughly 8-9 trillion dollars over ten years -- far more than the roughly 3-5 that lawmakers are seeking.

This is a really basic mathematical/policy error for a leading political publication to make. It may not be a good idea or a sensible way to close the deficit by eliminating every single tax deduction, but you need to give your readers accurate information so they can decide for themselves.

Obama has the republicans by the balls. I hope he squeezes them until they POP!

There is no need for democrats to compromise. Let the bush tax cuts expire. After that we can start from there.

Further into the comments both Ocean 515 and Sam Houston contend that the Bush tax cuts have expired. Only someone ignorant would say that on this site.

The Bush tax cuts were extended under Obama's tenure. They are set to expire again on Dec 31, 2012. Obama insists these tax cuts will not be extended again under his tenure for those making above $250,000. If an agreement is not reached before Dec 31, they will expire for everyone. The senate already passed a bill to allow extension of the Bush tax cuts only for those making under $250,000.